Channel Surfing's Next Wave

Henry C. Yuen is no couch potato. But he made his fortune giving them what they want. The 47-year-old mathematician-lawyer-entrepreneur co-invented VCR Plus, the hot box that millions of people use to program their VCRs just by punching in numbers from newspaper listings.

Now, Yuen has a better idea. He wants to put program listings and descriptions right on the TV screen so viewers can better surf through the ocean of shows on today--and on the 500-channel tidal wave that could break soon. Called GUIDE Plus, Yuen's system also lets users set their VCRs by clicking one button on the remote control.

UNFAZED. It's a smashing idea. But things have changed since Yuen launched VCR Plus in 1990. This time, Yuen's upstart Pasadena (Calif.) company--Gemstar Development Corp.--is up against the cable industry's deepest pockets. And onscreen guides seem to be on almost everyone's mind. Out in front, there's StarSight Telecast Inc., whose investors include Viacom, Cox Communications, and KBLCOM. Rupert Murdoch's News Corp. and cable giant Tele-Communications Inc. (TCI) are developing an interactive, onscreen version of TV Guide. And TCI plans to purchase United Video Satellite Group in Tulsa, Okla., which supplies more than 3,000 cable systems with the Prevue Channel. It offers a scrolling list of what's showing now, but United is planning an interactive version. "There's a blizzard of competing technology that will be pursuing the technophobic consumer," says market researcher Peter W. Hankin of Ryan Hankin Kent Inc. in South San Francisco.

Yuen is unfazed by the competition. For one thing, Gemstar's is the only interactive program guide that won't cost consumers a subscription fee. For another, he plans to bypass the cable industry completely, by licensing the technology needed to capture and display program information to makers of TV sets and VCRs. Gemstar has signed some 80 local TV stations to broadcast the listings. And in May, Yuen persuaded Capitol Cities/ABC to carry them nationally and virtually for free in exchange for letting ABC occupy the top line on the program guide. Gemstar has licensed most TV-set makers, Yuen says. He expects the first TVs with GUIDE Plus to hit the market next spring.

If anyone can pull this off, it's Yuen--a spry, wiry man associates admire for his boundless energy. Raised in Hong Kong, he came to the U.S. for college and stayed. With a PhD from California Institute of Technology in hand, he signed up with TRW Inc. and soon distinguished himself by describing how ocean waves look to radar from space. Along the way, he got a law degree and set up a thriving practice in the 1980s, negotiating business deals for Asian clients. Even as VCR Plus was launched in 1990, Yuen was still commuting between TRW and Gemstar. "I've always had the bad habit of taking on more than one full-time job at a time," he says.

He'll need that stamina to win the race to give consumers their first taste of interactive TV, one of the most visible signposts of the Infobahn. And Yuen admits that StarSight has a head start. Since last summer, the Fremont (Calif.) company's guide has been built into high-end Zenith TVs, and now, it's in Mitsubishi TVs and Samsung VCRs, too.

Yuen and his supporters play down StarSight's early lead. Its revenues since the system's launch totaled only $288,000 through Mar. 31, while losses since the company's 1986 inception stand at $68 million. StarSight is counting on cable operators to broadcast its electronic guide and collect a monthly fee of about $4.35 from each viewer. But there's no guarantee viewers will be amenable.

Yuen's privately held Gemstar has also had its share of setbacks, but it's generally better off. An aborted initial public offering last year revealed that revenues had leveled off at $66 million a year. But license income, which goes directly to the bottom line, grew to 41% of total profits in the year ending March, 1994, compared with 14% a year earlier. If that growth continues, investors could do an IPO in the near future.

Both the StarSight and Gemstar guides work by piggybacking listings and descriptions on the vertical blanking interval of the broadcast signal. That's the dark band that appears between frames if the TV set's vertical-hold control isn't adjusted properly. At present, the interval carries information needed for English-language captioning for the hearing-impaired, required on all TV sets 13 inches and larger. But that uses up just a fraction of the available space.

GOOD MEMORY. The systems switch on in the middle of the night, tune to the appointed channel, and download enough data for a week's worth of network and cable programs. This is stored on a memory chip in the set-top box or TV set. Consumers use a special remote control to call up and browse through the program guide. They can search for programs by time or channel--or they can search by subject, such as movies or sports. Then, to tape a show, they simply highlight its title and press record.

Right now, StarSight's guide is broadcast by PBS stations and Gemstar's is carried by ABC. The biggest difference is price. StarSight's subscription service is aimed at well-heeled viewers who won't mind paying an extra $50 a year for a guide. Gemstar's GUIDE Plus is patterned after VCR Plus: The TV-set maker pays a royalty to Gemstar for every unit shipped. The consumer pays a premium for the TV. But the interactive program guide is free.

The StarSight camp heaps scorn on Gemstar's approach. "[It] doesn't sound like much of a revenue stream to me," sniffs Robert E. Russman, a StarSight senior vice-president. But Yuen stands on his track record. Less than five years after it was introduced, VCR Plus is built into a quarter of all VCRs shipped worldwide. That's worth an estimated $40 million annually to Gemstar, not including revenues for making and selling stand-alone VCR Plus remote controls.

Yuen got the idea for VCR Plus when he tried to tape a Boston Red Sox game and ended up with a videocassette full of snow. He figured that if TV shows were numbered, programming a VCR would be as simple as dialing a phone. His next brainstorm was INDEX Plus, due out this year. Developed with JVC, Panasonic, and Hitachi, it will let VCR users browse through an onscreen list of TV programs that they've already recorded on videotape and fast-forward to the start of a program at a touch of a button.

To capture titles along with programs for INDEX Plus, Yuen had to persuade broadcasters to send program information with the TV signal. From there, it was a short leap to the idea of an interactive guide. With GUIDE Plus, Yuen is looking at a potential market two or three times as large as that for VCRs--some 27 million TV sets a year in the U.S. and as many as 120 million worldwide. That's a lot of couch potatoes--and a big sack of cash for Yuen--even if he makes only a few bucks a pop.

How Two Interactive Onscreen Guides Stack Up



PRICE Free $4.35/mo.

PROGRAM 2 days full, 7 days 7 days full

LISTINGS in sorted categories






set-top boxes

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